Roth Contribution - 5yr rule

[Daria B.]

I found several descriptions regarding this rule - below is one description.

What is the Five Year Rule?

An investor can withdraw his or her contributions to a Roth IRA at any time without tax or penalty. But, that is not the same case for any earnings or interest that you have earned on your Roth IRA investment. In order to withdraw your earnings from a Roth IRA tax and penalty free, not only must you be over 59 ½ years-old but your initial contributions must also have been made to your Roth IRA five years before the date when you start withdrawing funds. If you did not start contributing in your Roth IRA five years before your withdrawal, your earnings would not be considered a qualified distribution from your Roth IRA because of its violation of the five year rule.

I understand I can withdraw contributions without penalty but what of the earnings test.

My question centers around the "five years before the date when you start withdrawing funds." This relates to the interest and earnings. If I am 59 1/2 and meet that part of the rule, is the earnings like FIFO (first in first out)? 

Ex: ROTH opened in 2012

2012 contribute $5k, earnings $500.

2013 contribute $5k, earnings $700.

2014 contribute $5k, earnings $1k

2015 contribute $3k, earnings $1,100

2016 contribute $0, earnings $1,150

2017 contribute $0, earnings $1,160

These are all hypothetical numbers.

So now my principal is $18k and "earnings" as stated for each yr.

Does this mean I can only withdraw without penalty in 2017, $500 because it is now 5 yrs later and meets this 5 yr or can I withdraw more earnings because it's the "account" that was opened 5 yrs ago?

Thanks

[George Blower]

@Daria B.

A distribution is qualified if the Roth IRA owner satisfies two conditions. First, the Roth IRA owner must meet a five-year waiting period for distributions. This period begins on the first day of the taxable year
(January 1 for most taxpayers) for which the Roth IRA owner makes his first Roth IRA contribution (Treas. Reg. 1.408A-6, Q&A 2). The second condition is that the IRA owner meet one of the following penalty tax exceptions (IRC Sec. 408A(d)(2)(A)).

Age 59½ or older

Disability

Death

First-time homebuyer

ILLUSTRATION: Ben made his first Roth IRA contribution in 2009. On March 12, 2014, he attained age 59½. In December 2014, Ben decided to take a total distribution from his Roth IRA, which includes basis and earnings. Ben files his taxes on a calendar-year basis. Ben's distribution is tax-and penalty-free because he meets the requirements for a qualified distribution—he is age 59½ and his five-year period was satisfied on January 1, 2014.

Five-Year Period
Each Roth IRA owner has one five-year period starting with the first Roth contribution ever made by the individual--—the five-year period is not redetermined for each Roth IRA that an individual owns. Also, if the entire account balance of a Roth IRA is distributed and the IRA owner later makes contributions to a Roth IRA, the five-year period for qualified distributions does not start over with the subsequent contribution.